Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Coronavirus Coming Storm Act Now to Protect Yourselves and Family to Survive COVID-19 Pandemic - 19th Feb 20
Future Silver Prices Will Shock People, and They’ll Kick Themselves for Not Buying Under $20… - 19th Feb 20
What Alexis Kennedy Learned from Launching Cultist Simulator - 19th Feb 20
Stock Market Potential Short-term top - 18th Feb 20
Coronavirus Fourth Turning - No One Gets Out Of Here Alive! - 18th Feb 20
The Stocks Hit Worst From the Coronavirus - 18th Feb 20
Tips on Pest Control: How to Prevent Pests and Rodents - 18th Feb 20
Buying a Custom Built Gaming PC From - 1. Delivery and Unboxing - 17th Feb 20
BAIDU (BIDU) Illustrates Why You Should NOT Invest in Chinese Stocks - 17th Feb 20
Financial Markets News Report: February 17, 2020 - February 21, 2020 - 17th Feb 20
NVIDIA (NVDA) GPU King For AI Mega-trend Tech Stocks Investing 2020 - 17th Feb 20
Stock Market Bubble - No One Gets Out Of Here Alive! - 17th Feb 20
British Pound GBP Trend Forecast 2020 - 16th Feb 20
SAMSUNG AI Mega-trend Tech Stocks Investing 2020 - 16th Feb 20
Ignore the Polls, the Markets Have Already Told You Who Wins in 2020 - 16th Feb 20
UK Coronavirus COVID-19 Pandemic WARNING! Sheffield, Manchester, Birmingham Outbreaks Probable - 16th Feb 20
iShares Nasdaq Biotechnology ETF IBB AI Mega-trend Tech Stocks Investing 2020 - 15th Feb 20
Gold Stocks Still Stalled - 15th Feb 20
Is The Technology Stocks Sector Setting Up For A Crash? - 15th Feb 20
UK Calm Before Corona Virus Storm - Infections Forecast into End March 2020 - 15th Feb 20
The Growing Weaponization of Space - 14th Feb 20
Will the 2020s Be Good or Bad for the Gold Market? - 14th Feb 20
Predictive Modeling Suggests Gold Price Will Break Above $1650 Within 15~30 Days - 14th Feb 20
UK Coronavirus COVID-19 Infections and Deaths Trend Forecast 2020 - 14th Feb 20
Coronavirus, Powell and Gold - 14th Feb 20
How the Corona Virus is Affecting Global Stock Markets - 14th Feb 20
British Pound GBP Trend and Elliott Wave Analysis - 13th Feb 20
Owning and Driving a Land Rover Discovery Sport in 2020 - 2 YEAR Review - 13th Feb 20
Shipping Rates Plunge, Commodities and Stocks May Follow - 13th Feb 20
Powell says Fed will aggressively use QE to fight next recession - 13th Feb 20
PALLADIUM - THIS Is What a Run on the Bank for Precious Metals Looks Like… - 13th Feb 20
Bitcoin: "Is it too late to get in?" Get Answers Now - 13th Feb 20
China Coronavirus Infections Soar by 1/3rd to 60,000, Deaths Jump to 1,367 - 13th Feb 20
Crude Oil Price Action – Like a Coiled Spring Already? - 13th Feb 20
China Under Reporting Coronavirus COVID-19 Infections, Africa and South America Hidden Outbreaks - 12th Feb 20
Will USD X Decline About to Trigger Precious Metals Rally - 12th Feb 20
Copper Market is a Coiled Spring - 12th Feb 20
Dow Theory Stock Market Warning from the Utilities Index - 12th Feb 20
How to Get Virgin Media Engineers to FIX Hub 3.0 Problems and NOT BS Customers - 12th Feb 20
China Under Reporting Coronavirus COVID-19 Infections by 66% Due to Capacity Constraints - 12th Feb 20
Is Coronavirus the Black Swan That Takes Gold To-Da-Moon? - 12th Feb 20
Stock Market 2020 – A Close Look At What To Expect - 12th Feb 20
IBM AI Mega-trend Tech Stocks Investing 2020 - 11th Feb 20
The US Dollar’s Subtle Message for Gold - 11th Feb 20
What All To Do Before Opening A Bank Account For Your Business - 11th Feb 20
How and When to Enter Day Trades & Swing Trade For Maximum Gains - 11th Feb 20
The Great Stock Market Dichotomy - 11th Feb 20
Stock Market Sector Rotation Should Peak Within 60+ Days – Part II - 11th Feb 20
CoronaVirus Pandemic Stocks Bear Market Risk 2020? - Video - 11th Feb 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Gold, Let's Get Physical With China

Commodities / Gold & Silver 2009 Sep 04, 2009 - 12:49 PM GMT

By: Adam_Brochert


Best Financial Markets Analysis ArticleThe recent development of the Chinese government no longer restricting Gold and silver ownership and now actively promoting it is a very, very big deal (see article reporting this here and see this clip from Chinese television promoting silver - please remember that this item would not appear on Chinese television without explicit central government approval). To quote from the linked article:

"The Chinese are being converted from being the lowest per capita [G]old consumers in the world to a nation of small precious metals investors. Now, by next year, Chinese consumption of [G]old is likely to exceed that of India, which has been for years the world's biggest [G]old market."

This will generate huge physical demand for Gold and silver. I am currently intermediate-term bearish on silver and neutral on Gold because I still believe we need another deflationary price wave of asset liquidation. However, this story is a longer term development that is wildly bullish for precious metals investors and owners.

The physical markets for Gold and silver are severely constrained. Those who say otherwise are dishonest or ignorant. Paper Gold and silver, which is not the same as Gold and silver at all, is plentiful. It is easy to buy the GLD ETF, a futures contract or some other paper proxy for actual physical Gold. I think these instruments defeat the purpose of Gold and silver investing and actually help to keep the price much lower than it should be. I do not advise paper Gold. Those who want paper investments should invest in Gold mining companies, but I think it is prudent to first secure some physical Gold as a portfolio anchor and insurance against paper defaults.

The development of the Chinese government actively encouraging physical precious metal investment is not just important because of the sheer physical demand this move will generate. It is also philosophically and politically important and is yet another sign post pointing to the end of U.S. Dollar hegemony for those who care to pay attention.

A government with a fiat currency that is backed by nothing but paper promises should be trying to get its citizens to despise Gold! Gold is the enemy of fiat currency regimes and always has been. America has been taught that Gold investing is kooky or weird and for "end of the world" types. This mantra has been repeated by the mainstream financial community over and over and Americans, in aggregate, have been brainwashed to believe it.

Why wouldn't the Chinese, who have an unbacked paper currency pegged to America's unbacked paper currency, promote saving money in Yuan to their people? Why wouldn't they tell their people how strong their banks are and how they can earn 5% or 10% on a long-term certificate of deposit? In short, why aren't they lying to their people about money as our government lies to us?

There aren't many reasonable options for this conundrum. They all center around one theme: the Chinese government wants more Gold and silver within its borders. Why would it want that? What is the point of the central government promoting an investment class that creates very few jobs and has little prospect for immediately growing the Chinese economy?

I believe China is preparing for a post-U.S. Dollar world and I believe they are planning to promote a precious metals backed currency in some form (whether their own or an international currency for trading purposes). I believe this is being done methodically and gradually by China and I believe it has grave long-term implications for the U.S. Dollar.

Though not good for the U.S. Dollar, a return to sound currency on any scale is a welcome development in my mind. Gold is money. Gold is a check on spendthrift governments that insist on Keynesian insanity. Gold stands in the way of those who believe increasing the indebtedness of a country is a way to grow or stimulate anything besides debt and increased central bank power.

While China has begun promoting real savings to their people, the United States continues to deny reality and promote toxic waste to its citizens, pretending that our Dollar is strong and our banking system is solvent. When demand for Gold and silver increases in the United States, our government conveniently stops making the retail coins they are legally bound to produce. The more popular these U.S. Mint coins become, the less our government wants to make them. Here's a previous rant on this topic.

When stepping back from the day to day price swings, this is a big picture of an emerging economy and a declining one. It is not pretty. And please don't think I'm excited by the prospect of China gaining global power - I'm not. I wish it weren't so. American citizens need to buy physical metal in much bigger quantities than they have so far. Our government should be promoting physical precious metal investment and should be falling all over themselves to provide an unlimited supply of U.S. minted Gold and other precious metal coins. But alas, up is down and right is left in a fiat world, so all I can do is scream and yell in cyberspace to let off a little steam and hopefully let a few people know what's coming so they can prepare.

As an aside, many people have asked me about how to buy and store precious metals. I am going to summarize how easy it is in one long-winded paragraph!

You can buy $10,000 worth of Gold by buying ten 1 ounce coins and it is roughly the same physical size as a $10 roll of quarters. Why are people concerned about storage? If you can't find a safe place to put an object the size of a $10 roll of quarters, then you may have to consider paying for a safety deposit box or other storage facility. If you have hundreds of thousands of dollars to invest, well that's a different story (email me - let's do lunch!). I recommend government 1 ounce coins for novice investors (e.g., American Eagles, Canadian Maple Leafs, South African Krugerrands, Austrian Philharmonics) and they can be mail ordered with minimal shipping costs (may be cheaper than using a local coin shop but there's nothing wrong with comparison shopping for such a big purchase). I would buy whichever of these 1 ounce coins has the lowest price on the day you are ready to make a purchase and avoid "rare" or "special" coins and just go for the plain Jane cheapest 1 oz. government Gold coins you can find. I have used several dealers in the past and never had a problem with any of them but I like and (no financial relationship with these firms other than as a customer).

Let's get physical along with China and restore some of the wealth destroyed over the past few years by replacing it with actual debt-free savings.

Visit Adam Brochert’s blog:

Adam Brochert

BIO: Markets and cycles are my new hobby. I've seen the writing on the wall for the U.S. and the global economy and I am seeking financial salvation for myself (and anyone else who cares to listen) while Rome burns around us.

© 2009 Copyright Adam Brochert - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules